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Let’s Make a Deal
Congress returns to work Monday with just weeks to craft new agreements on aid to households and protections for businesses, urged on by signs of a faltering economic recovery, a resurgent coronavirus pandemic and a looming deadline for enhanced unemployment payments. Both parties appear eager to pass another bill and some early areas of potential compromise have emerged on pulling together what would be the fifth coronavirus package since the beginning of the year, Andrew Duehren reports.
One of the thorniest issues for lawmakers: Some 25 million Americans are set to lose $600 a week each in federal unemployment benefits at the end of the month. Many people view the payments as a lifeline, and analysts say the $15 billion a week in federal spending has provided vital support to an economy staggering from the effects of the pandemic. Critics say the money, paid on top of regular state jobless benefits, discourages some Americans from returning to work. A University of Chicago study found 68% of unemployed workers who are eligible for benefits receive more in jobless payments than their lost earnings, Eric Morath and Te-Ping Chen report.
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WHAT TO WATCH TODAY
Japan’s consumer-price index for June is out at 7:30 p.m. ET.
TOP STORIES
It’s Not Just the U.S. Trying to Formulate a Fiscal Response
Negotiations among the European Union’s 27 leaders for recovery plans worth €1.8 trillion ($2.06 trillion) dragged into a fourth day on Monday, leading to tense exchanges and fears of a breakdown. After three days of talks to agree a proposed spending package to lift Europe’s economy out of a coronavirus-sparked slump, EU leaders still hadn’t nailed down the size of the final plan, how much of it should be available in grants and some of the conditions attached. The discussions ran through the night and will resume on Monday afternoon Brussels time, Laurence Norman reports.
Recession to Recovery
The global economy suffered a severe contraction in the three months through June, and it is becoming clear that the strength of its recovery will depend on authorities’ success in dousing continued pandemic flare-ups. Countries’ freshest economic-growth figures, to be released in coming weeks, are likely to show the global economy entered a recession in the first half of this year and shrank in the second quarter at the fastest peacetime rate since modern records began after the Great Depression. The recovery has begun, but there are mixed signals about its health and staying power. Some sectors have sprung back to life more decisively than expected, including retailing and manufacturing. The flip side is it appears that, until a vaccine becomes widely available, surges in coronavirus infections will repeatedly have a damping effect on activity, Paul Hannon reports.
Business executives who were bracing for a monthslong disruption due to the coronavirus are now thinking in terms of years. The fierce resurgence of Covid-19 cases and related business shutdowns are dashing hopes of a quick recovery, prompting businesses from airlines to restaurant chains to again shift their strategies and staffing or ramp up previous plans to do so. They are turning furloughs into permanent layoffs, de-emphasizing their core businesses and downsizing production indefinitely, Chip Cutter and Doug Cameron report.
“We cannot defy gravity and continue with the business model we had before the pandemic.” —Pret A Manger CEO Pano Christou
Travel is bouncing back from the coronavirus, but tourists are sticking close to home. The rise in homegrown tourism won’t fully replace pre-pandemic revenue, but it is an important boost following months of almost no travel spending, economists and companies say. The upturn is most pronounced in Asia, where the virus emerged and where many countries have largely corralled contagions. Europe is seeing a similar trend. In the U.S., some domestic travel has rebounded, though renewed surges in Covid-19 cases have undercut some initial enthusiasm, Andrew Jeong and Philip Wen report.
School’s Out Forever
Child-care problems are getting worse for many parents and employers. Roughly 13% of parents have lost jobs or reduced work hours because of a lack of child care during the pandemic, according to a coming report by Northeastern University. Now, with schools considering extending classroom closures in favor of online education, and day-care centers weighing whether they can afford to stay open under social-distancing guidelines, companies are forced to improvise anew to balance productivity with increasingly uncertain child-care options for their employees, Katherine Sayre reports.
About 20% of childcare facilities—preschools, daycares and the like—remain closed since the pandemic hit, according to research from Homebase.
Retailers are facing the prospect of another disappointing season as schools dial back reopening plans because of the coronavirus pandemic.
Colleges eager to cut costs have settled on an easy target: low-profile sports that don’t draw many spectators, attract a disproportionate number of white or foreign athletes and are relatively pricey to operate. Schools ranging from Stanford University to the University of Connecticut and the University of Akron are scrapping varsity teams for sports such as rowing, fencing, tennis and squash, Melissa Korn reports.
Living for the City
During the past quarter-century, many American cities flourished as crime tumbled and educated young workers moved to revitalized downtowns, changing the economic and political landscape of the nation. Three major shocks now threaten to upend that urban renaissance: The coronavirus is preying on densely packed places; anger over policing is producing social unrest reminiscent of earlier eras; and strained city and state budgets could prolong their economic pain, Jon Hilsenrath reports.
WHAT ELSE WE’RE READING
What do the unemployed do with an extra $600 in benefits? Spend it. “Although average spending fell for all households as the economy shut down at the start of the pandemic, we find that unemployed households actually increased their spending beyond pre-unemployment levels once they began receiving benefits. The fact that spending by benefit recipients rose during the pandemic instead of falling, like in normal times, suggests that the $600 supplement has helped households to smooth consumption and stabilized aggregate demand. … Households that wait two months to receive benefits due to processing delays have large spending declines. Compared to the employed, spending falls by 20% prior to receiving benefits,” JPMorgan Chase Institute and University of Chicago economists find.
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